Op-Eds Speaking Truth to the Powers-That-Be
Be honest: You and most people are affected by the economy, but you only have a glimmer of an idea why it’s screwed up. There is the massive disinformation campaign put on by the billionaires who control millions spent by companies’ lobbyists, Astroturf grassroots activist groups, and propaganda outlets like Fox News to make the common thinking on the economy their thinking. Here’s a 101 on the economy, and why the fear-narrative on debt ceiling talks and cries of America going broke are a lot of hooey.
The old cliche is true: Money makes the world go round. The U.S. Dollar is the de facto world currency. There are billions and billions of our dollars circulated and transacted around the globe daily that may never touch our shores. Our treasury bonds are the one instrument in the world where people can safely park their money from fry-cooks to financiers to world corporations and governments.
What backstops our currency and our bonds? Our word that we’ll make good on it.
Yep. That’s it.
It almost sounds too ridiculous to be true, doesn’t it? The same is true of the other big industrialized nations. The promise to pay of the Federal Reserve, and the other central banks, is the bedrock of trillions of dollars in global transactions.
It’s a confidence game.
Our $14.6T economy still dwarfs runners-up China, Japan and Germany combined. Our relatively stable political system, and the unique make-up of the United States as a polyethnic, religiously diverse, peaceful, bountiful, productive land have made our currency and our Treasury Bonds the most secure means of backstopping both national treasuries and the wealth of billionaires world-wide. 
Some economists say that, by 2020, we will be passed up by one or more countries. Of course, most of these forecasters missed the last couple of bubbles, and probably couldn’t correctly forecast the arrival time of their 6:10pm commuter train home.
Discount the China theorists. The notion that ‘China will be passing us up’ as the world currency is nonsense. Sure, the Renminbi, China’s currency, might be worth more in 10 years. There will still be hundreds of millions of Chinese languishing in near poverty in the broad provincial areas of the country. The difference between China and Western democratic governments is that the Chinese government has its political hands in its Central Bank. The CBs of the West are independent of their politicians to avoid governments playing politics with monetary policy. What the Republicans are doing now is as close to meddling as they can get legally. Most countries in the West would have trouble, as well, aligning their financial system with a government that is Communist and totalitarian.
The only possible competitor for the dollar is the Euro. It is a big currency with lots of holes. The Germans don’t like much of what goes on in other countries. The Brits boycott it in favor of a stronger Pound Sterling. Some member states aren’t pulling their weight in the European Union (EU). It is also vulnerable to the bad bookkeeping of its lesser members. Witness the problem that the EU is having withGreece right now.
The debt ceiling is not the problem for the U.S. or our economy. In fact, years ago,raising the debt ceiling was not a thing one in the House or Senate could vote upon. Republicans in the Reagan years reasoned that the budget creates the deficit situation. You can’t vote to raise something that raises itself when you create a budget that spends more than you bring in. The debt ceiling vote was eliminated. The Bushies reintroduced it as a political ploy to take the heat off of deficit spending on the budgetary side as they were ramping up the hemorrhaging of the Treasury for the Iraq and Afghanistan wars.
Yes, we are approaching debt that actually equals one year of our total work output, the Gross Domsestic Product. Unless we start a couple of trillion dollar wars again, or Wall Street returns the economy back into massive collapse, we can and will repay the debts run up over the next decade. It is a fine time to talk, on both sides, about what can be done to save money, but if we didn’t, the idea that Mr. Obama’s high-spending ways will lead us to ruin is a GOP myth. He would have to work very hard to outstrip Mr. Bush, and most of his financial decision-making of his administration has been to dig the United States out of the massive hole that it was in when he took office.
Is the United States broke? Hardly. We can still pay our bills even with a monumental debt. The notion that Republicans and the mainstream media have been peddling that America is going broke is a farce, being played for political effect. It diverts attention from the Republican’s blood oath to billionaires to preserve a 3% tax break for our wealthiest, to keep corporate off-shoring tax breaks, and to insure that low regulation that keeps prying eyes out of the same tactics that generated the 2008 market collapse remains alive and well.
Then there is the Libertarian lie, the Tea Party tall tale: If Uncle Sam used Quicken, like you or me, he’d be able to balance our budget, and still have enough money left over to take Lady Liberty out to the picture show on Saturday night.
The government is not you or me. Our rich Uncle Sam has a cousin with an “in”: The Secretary of the Treasury. Mr. Geithner literally prints money and can borrow whatever we need.
The Treasury can’t just print enough money to erase our deficits. Flooding the market with that much cash would lead to inflation, which would only increase the costs of everything and devalue the dollar.
The Treasury does issue volumes of Treasury Bonds, though. True, bonds are debt that we have to pay back, with interest, but they are the most sought after safe haven for parking money in bad times. Not just by Americans, mind you, but millions of people and most of the governments around the world where their government banks are less stable, or inflation is running away with their local currency, or everyone is running around killing one another for their variation of believing in a higher power.
You would think that the more bonds that we put out, the more worthless that they become. That may be true for a GE or a Citibank. Not the government. The need for a safe haven for cash that pays a bit of interest is so great that the Treasury Bond is still golden, even though we issue tons of them. It retains its luster because they have the full faith and credit of the United States Government, and we pay.
Mr. Bernanke chairs the Federal Reserve. He is one of a handful of people in the modern world economies whose word really is as good as gold. If Bernanke says that the Fed will cover obligations, so it shall be.
That’s true even after the trillions in debt that the Bushies and their pals ran up with a couple of wars and a Wall Street meltdown roll out.
Okay, so the Federal government can make money and dial up debt by just saying so. What is the real problem then?
How productive we are. The output of our labors, the stuff that we produce in crops, livestock, raw materials, finished goods and services, is our Gross Domestic Product (GDP). The only thing that can end this party is if we start producing a lot less than the $14.6T we do now. If that drops, or the fear exists that it might, our bonds may cost more to finance. Right now, gold has soared in price because many large investors and governments are stockpiling it to backstop their dollar and U.S. Treasury debt holdings. Even with that, though, the United States is still far from broke.
America’s Kryptonite is employment.
Three years after cash sink hole on Wall Street, too many people are still unemployed. Corporations that dumped salary costs are experiencing record profits, yet they are not hiring. What has not been automated or off-shored is not, apparently, necessary as most public companies are reporting robust earnings. Large employers who had been looking to automate and reduce workforce also saw the opportunity to lighten up payrolls and lay the blame on the economy. Millions of people were unemployed.
If all of these businesses are profiting handsomely without the need of more employees, as advances intechnology is prone to making happen, what do you do with those people who have been outsourced to cheaper labor or made obsolescent by technology? How do millions of good, hard-working people looking for a job pay for a roof over their head, food, and services? If people aren’t productive, they consume less, which in turn hurts other employed people.
Mr. Obama has been trying to address employment, which he rightly sees as the key to moving forward, both in government and in the private sector. He has tried to expand next generation technology and develop more scientists and engineers who can reshape the future. The stimulus, with all of its flaws, kept the recession from becoming the second Great Depression.
The Obama Administration has been trying to stimulate job creation. The Republicans, who cried ‘Jobs! Jobs! Jobs!’ to get elected have spent time on abortion and gay marriage, but have not put forward one piece of employment-stimulating legislation since taking over the House.
Republicans’ tired calls for trickle-down economics, by keeping the Bush Tax cuts, and low regulation have never yielded the jobs of prosperity that they claimed since Ronald Reagan’s economists cooked up that batch of economic poison in the 1980s. Florida, which comes as close to the GOP idea of government Nirvana, with no state tax and Jeb Bush-led, Rick Scott reinforced deregulation and privatization of epic proportions, has some of the highest unemployment figures in the country.
We cannot move forward, because the corporatocracy and their Republican lap dogs continue to play political and economic games with the lives of millions of Americans to try to ride out the Obama Administration. If you make just enough people unhappy with Mr. Obama, who already is challenged by the millions of white Americans whose racism prevent them from ever seeing him in a positive light, it might bring in a Republican who will keep the party on Wall Street that started with Reagan going for another four years.
Wall Street has seen Mr. Obama. They do not like him. He tries to hold them accountable. His administration held back their millions in bonuses that they pay out to themselves until they paid back what they owe at rates that are competitive. When the government took over a “too big to fail” company like GM, they fired the deadwood that put it in jeopardy, and exited the restructuring as quickly as possible. The government is a very large and unhappy and accountable shareholder. It gets action that you or I or even Warren Buffet could not.
The debt ceiling is pure political theater. It’s a dangerous game, though. By making the connections between the budget and the debt ceiling for short-term political gain, Republicans are opening up a Pandora’s box of future financing troubles for our country. Playing politics with the bedrock of our financial system only invites the Democrats at some future juncture to do the same.
Confidence is the name of the game, and the GOP, seems to be turning on the citizens of the country that they are sworn to govern and protect in favor of their corporate masters who grind a different, more international agenda. Something bigger is happening, and the day-to-day lives of millions of Americans are being held hostage to the greed of a very wealthy few.
Understand how the economy is being played, and get mad about it. You are being gamed, and your guardians, the media, are playing along for ratings.
My shiny two.